‘Near-Zero’ Price Growth Boosts Homebuyers’ Prospects

Slowly but surely, inch by inch, homes are becoming less unaffordable.

Prices for existing homes in the US inched up just 0.2% in July, according to a National Association of Realtors report published Thursday. The near-zero growth rate is the metric’s weakest reading since a 0.9% decrease in June 2023 and “suggests that roughly half the country is experiencing price reductions,” NAR chief economist Lawrence Yun said in a statement. Translation: We’re not at ‘affordable’ yet, but we could be heading in the right direction. 

With Apologies to Minnesota

Indicators of a softening housing market have been popping up all summer. A May report from RedFin showed that home sellers outnumbered home buyers in the US by half a million, or the largest figure since 2013. Meanwhile, data from the US Census Bureau for the same month showed new home construction starts fell to a multi-year low as a glut of inventory rose to the highest levels since 2009. And just last week, a National Association of Home Builders survey showed that home builders were offering the most sales incentives since the COVID-19 pandemic.

Thursday’s data is a sign that home sellers are finally feeling the force of multiple market headwinds, though not equally around the country; after all, as Yun said, only roughly half the country is experiencing price reductions. Median home prices decreased in July in both the American South and West, where prices have soared the most in recent years, while median prices increased 0.8% and 3.9% year-over-year in the Northeast and Midwest, respectively.

Still, the near freeze in aggregate price wasn’t the report’s only indicator of home buyers gaining an advantage:

• Home sales ticked up 2% month-over-month in July, besting consensus expectations of a sales decline and signalling that eager buyers are starting to bite at falling prices and other incentives. 
• Meanwhile, the minor 0.2% year-over-year price increase (to a median price of $422,400) means that US wage growth is now comfortably outpacing price growth.

One Tiny Step Forward: Yun told Barron’s on Thursday that prices could fall as much as 5% nationwide in the coming months, after increasing around 50% from July 2019 through July of this year. On the other hand, Zillow’s Home Value Index still projects a 0.4% increase in prices in the following year. And while any progress is likely welcome for prospective homebuyers, there’s still a long way to go before home prices tip back toward “affordable.” How far, exactly? According to Zillow estimates, either prices still need to fall another 18% or mortgage rates will need to drop to 4.43% for prices to be affordable to the median US family. Freddie Mac data out Thursday showed 30-year fixed mortgage rates are steady at 6.53%, the lowest point since October 2024. A housing crisis that’s been years — if not decades — in the making will take more than a couple of months to unwind.